Never assume this is a passive activity only.I'm self employed with a flexible schedule and have long had an interest in Real estate.

Basically you get rid of your operating deductions and file on a Schedule C vs Schedule E.Here is an excerpt from an IRS document - https://www.irs.gov/publicatio...Schedule C (Form 1040), Profit or Loss From BusinessGenerally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer.Providing substantial services.If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C.

@Henry LazerowThat's what I've been seeing too. The

Furthermore, I recommend scheduling a home inspection by a certified specialist who can identify any underlying issues that may not be obvious or known by the seller.

I'd request the seller's Schedule E for the property.

At the minimum you would be banned forever from the program.I haven't gotten a contract or lease yet, as the local housing authority has been very slow with even getting the inspection scheduled.

Ask to see it yourself but schedule it ahead of time. 

I recommend marketing two weeks prior to completion with a little buffer for the move-in date in case you get behind schedule.

It appears from talking to a friend that it may be possible to just file a 1040 and thus omit the tedious 1065s and 1120- one apparently has to do schedule E for the pass through income for the 1040.

The seller acts as the bank – you sign a promissory note with them and you pay them a mortgage instead of to the bank.A promissory note is a legally binding document that contains all the particulars of a seller financing including the repayment schedule.